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05-22-2013, 05:02 PM #1
Sony Considers Spinning Off Its Entertainment Division to Help The Company Compete
According to Sony CEO Kazuo Hirai, Sony could potentially drop their entertainment division in order to help its electronics arm better compete against Apple and Samsung. The board will soon be considering a proposal put forward by U.S. hedge fund manager Daniel Loeb, who runs Third Point LLC. Loeb suggested that Sony sell off or spin off its entertainment division, which currently includes movies, music, and television, in order to shore up its electronics manufacturing unit.
Under Loeb’s proposal, Sony would be selling off 15% to 20% of its entertainment business in a public offering that would result in a separately listed company. Hirai told reporters that “This will be deliberated by the board. We have only just begun to study this.”
He hinted that if Sony were to go through with any similar plan, it would likely result in the entertainment business being made public but not in the unit functioning as a separate entity. Sony’s entertainment arm, which includes the James Bond film franchise, the world’s largest music publishing library, and shows such as “Breaking Bad” pulled in $862 million in operating profit last year, nearly as much as its consumer electronics division lost. The company’s entertainment division was Sony’s second-largest source of earnings last year.
Since he took over as CEO, Hirai has sought to implement a turnaround plan for the company. His scheme is the “One Sony” plan, which consists of largely narrowing the giant’s focus to a few areas including digital imaging, gaming, and mobile.
In the gaming segment, Sony is coming off a third-place finish in the home console race and continues to struggle in the portable console fight as well. The company hopes to turn around at least its home console fortunes with the release of the upcoming PlayStation 4. To compete in the mobile gaming market, the company is dropping developer fees in hopes that game developers will take notice and help create games in order to help it compete with its primary competitor, Nintendo’s 3DS.
In the mobile segment, Sony may have an even more difficult road to face. Being a major player in the mobile segment at one time, Sony has seemingly struggled to have an impact in the smartphone era with no device to help compete with the current offerings. The company’s mobile division sees continual losses as both Apple and Samsung grab all the profit in the segment.
We’ll have to see if the company can turn around its misfortunes with their future plans.